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Accelerating the Board of Directors Function

The Board of Directors serves as the governance function of the organization. Its directors act as the direct representatives of its shareholders, voting on their behalf as though all of the shareholders were in the room at the time. The Board is responsible for the long-term health and prosperity of the organization.

Over the years, many Boards have attempted to narrow their scope of responsibility to choosing senior executives, protecting the financial corpus of the organization, and approving mergers, acquisitions and high-level budgets along with a few other things. Directors’ exposure to poor decisions and lack of attention to other issues is mitigated by Directors and Officers Liability Insurance. While the Directors may be “safe” on a personal basis, they often leave the organization, and the interests of the shareholders they are elected to represent, exposed.

Here is a simple scenario that has played out in Board rooms across the world. The organization experiences a major shift in their marketplace, and the old way of doing business is not going to work anymore, but no one seems to be able to provide the Board with a risk-free assurance that changing course and changing their Business Architecture to meet the new way of doing business is going to prove profitable. The Board prefers to stand pat, meeting after meeting, as Borders, Blockbuster, TWA, Kodak, Polaroid, Tower Records, Palm, etc. falls behind its competitors.

In order to fulfill its legal mandate of ensuring the long-term health and prosperity of the organization, the Board’s primary function in today’s world must move beyond simply protecting capital and values to include being the organization’s harbinger of the future. It must “get it and demand it.” It must call in its own research, make sure senior management is on the right path, and be ready to approve investments on a much scale larger and more rapidly than ever before. It must do what it must each meeting to drive the organization forward into continued relevance and sustainable profitability.

Without this high-level of support from a very knowledgeable Board, opportunity will pass the organization by time-and-again until it becomes a write-off on its shareholder’s income tax statement.

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